Economic and competitive conditions bring incentive for business organizations to improve operations to reduce costs, including inventory costs. Operations can be improved in fields of advancing technology by focusing design and development resources in areas that improve competitive advantage while leveraging costs of other product aspects across multiple products.
Cost leveraging enables aggregation of component demand across possibly many products leading to improved economies of scale, aggregate volume discounts, and reduction of supplier prices. Component leveraging also can reduce supply chain, handling, and inventory costs since component sorting, labeling, and tracking are reduced.
Component leveraging can reduce costs in other areas. For example, usage of a particular component in multiple products can avoid duplication of research and development costs. A reduction in the number of components can reduce the incidence of confusion and errors by inadvertently including an incompatible component in a product.
In a high-volume producer, inventory handling and tracking costs can be reduced by millions of dollars simply by aggregating components among multiple products.